Case Studies

Fraud can happen to anyone. Read real life stories about how everyday people lost their money to scam artists.

1. Misappropriated Savings - $60,000

The Case:

An elderly widow sold her family cottage with the intent of investing the money. Her income was limited, and she wanted to secure additional income for her retirement. She took $60,000 to her Financial Adviser.

He asked the widow to sign a blank cheque for the entire amount. Although he was registered to sell mutual funds, he didn’t ask her to sign any paperwork.
He then deposited the cheque into an account for a company, of which he was the director and general manager and his wife was a major shareholder. The company was in financial jeopardy at the time.

The widow received a few interest payments, but the $60,000 principal investment was lost.

The Punishment:

A trial found him guilty of securities law violation, as he was not registered to sell that type of investment. He was sentenced to six months in jail and was permanently barred from trading securities in Manitoba. The widow received a settlement from the mutual fund company that had employed the financial adviser.

Lessons Learned:

Even when dealing with registered investment advisors, the possibility of investment fraud still exists. Be wary of investments that sound too good to be true, and always make sure all transactions are documented. Never sign blank documents or make out a cheque to an individual or company you do not know.

2. False Promises - $160,000

The Case:

Ads were placed in Manitoba newspapers by a tech company promising to assist investors in unlocking funds held in RSP accounts. The investors had to purchase shares of the tech company, which they were led to believe would increase in value.

The company then "loaned" the investors a percentage of their money back. The investors were also made officers of the company to make it appear as though these were internal business transactions, when in fact these new officers knew nothing about the operation of company.

The investors lost 30 to 40% of their money and faced possible tax consequences. The company shares are currently worthless and will likely never have any value.

The Punishment:

The president of the company was sentenced to 3 months in jail and 2 years of supervised probation. He paid back $20,500. A second individual involved received 12 months in jail.

3. Empty Investments - $3.3 million

The Case:

A wealthy, 83-year-old philanthropist was looking to invest a large sum of money into a GIC. Her accountant referred her to her brother, a branch manager at a local investment firm . And so began what she later called her “year of hell.”

She trusted her adviser with three bank drafts totaling $3.3 million. Each was made out to what appeared to be a legitimate investment firm, to be invested in a GIC. Her adviser issued false statements to confirm the deposits.

Come tax season, the investor called the Credit Union where she thought her money was invested to ask for her T5 slip. She then found out that no GIC existed in her name. The adviser had deposited the drafts into an account that he controlled and used for personal gain.

The Punishment:

A panel of the Manitoba Securities Commission found the adviser’s conduct egregious, and a massive breach of trust. Insurance eventually restored the stolen money to the victim. The perpetrator was convicted in court and sentenced to 10 years in prison for this offence and other victims.

Lessons Learned:

Even the most careful investor can be defrauded. It is important that investors deal with registered individuals/firms in the event that there are problems you may have a better chance of recovering your losses.